What is Wrong with Islamic Economics?
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What is Wrong with Islamic Economics?

Analysing the Present State and Future Agenda

  • Studies in Islamic Finance, Accounting and Governance series

Muhammad Akram Khan

What is Wrong with Islamic Economics? takes an objective look at the state of the art in Islamic economics and finance. It analyses reasons for perceived stagnation and also suggests a way forward.
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Chapter 12: Modernist thinking on riba

Muhammad Akram Khan

Extract

We find the earliest reference to modernist thinking on riba in the ideas of Muhammad Abduh (1849–1905), the Grand Mufti of Egypt in 1899–1905. Abduh issued certain verdicts during his lifetime on the question of riba. His pupil Rashid Rida (1865–1935) elaborated his writings, though at times it becomes difficult to tell if a certain idea derived from Muhammad Abduh or was a brainchild of the pupil. Rashid Rida held that the prohibition of riba in the Qur’an belonged to only a compound rate of interest and not to a simple rate of interest (Khalil and Thomas 2006: 71). Badawi (2000) has discussed the views of Muhammad Abduh and Rashid Rida in detail. His conclusion is that Muhammad Abduh never explicitly decreed that contemporary commercial interest is permissible. It was Rashid Rida who, after the death of Muhammad Abduh, elaborated his ideas and concluded that the prohibited riba was the one in vogue during the times of the Prophet. Contemporary interest on commercial loans was not riba, as it did not fall in the prohibited category.

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